Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares in Sorrento Therapeutics (NASDAQ:SRNE) jumped by over 15% earlier today after NantWorks LLC's NantPharma acquired rights to Sorrento Therapeutics' cancer drug candidate Cynviloq.
So What: NantPharma is acquiring rights to Cynviloq by taking over Sorrento's Igdrasol subsidiary. In exchange, Sorrento is receiving $90 million upfront from NantPharma. Sorrento also has the chance to earn up to $600 million more in regulatory milestones, as well as the potential for another $600 million in sales milestones if Cynviloq ever reaches the market and achieves specific sales targets.
NantPharma is paying this much for Cynviloq in hopes that it can eat into the market share for Celgene's (NASDAQ:CELG) cancer drug Abraxane. Both Cynviloq and Abraxane are formulations of paclitaxel.
Now What: What makes this deal even more interesting is that NantWorks LLC's founder is Abraxane's inventor, Dr. Patrick Soon-Shiong, the founder of Abraxis BioScience, which was sold to Celgene for $2.9 billion in 2010.
This is the third deal that Shiong has inked with Sorrento. In December, NantWorks LLC's Nantibody LLC agreed to collaborate with Sorrento on cancer and autoimmune disease immunotherapies, and in March, NantCell LLC, another NantWorks LLC subsidiary, entered into another immunotherapy deal with Sorrento. As part of the December deal, Nantibody LLC also acquired a 19.9% stake in Sorrento, so it's clear that Shiong is making a big commitment to this company.
The appeal of more specifically targeting cancer to improve efficacy and safety is immense, and Abraxane has already proven that paclitaxel approaches can be a big commercial success. In the first quarter, Abraxane revenue was $223 million, up 21% year-over-year.
Since Sorrento is developing Cynviloq through the abbreviated pathway, its single small trial to determine potential bioequivalency to Abraxane could allow it to reach the market quickly. That could mean that Sorrento is worthy of investors. watch lists.
Todd Campbell is long Celgene Corp. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.